Trans Union, based in Chicago, Illinois, is one of the three major credit bureaus in the United States. Trans Union gathers information on consumers and sells consumer reports containing data about the credit of millions of Americans. Buyers use this information to evaluate consumers’ credit. Performance Data, a division of Trans Union, is engaged in the target marketing business. Target marketing involves selling goods and services directly to consumers by mail or telephone. Trans Union’s target marketing uses information from its consumer reports to prepare a list of consumers who meet certain criteria. It sells this list for use in soliciting consumers.

The FTC enforces the Fair Credit Reporting Act (FCRA), which protects the privacy of credit information by prohibiting credit bureaus from furnishing to anyone the data they compile except under specific circumstances. For example, the law permits credit bureaus to release "consumer reports" for a client’s use in deciding whether to approve an application for credit or a job, and also in response to a court order. Under the FCRA, a permissible purpose for disclosure exists if a consumer authorizes the disclosure. The FTC also permits "prescreening" -- providing lists of consumers meeting certain credit criteria to credit grantors, as long as the credit granter gives each person on the resulting list a firm offer of credit.

FCRA amendments give consumers the right to opt-out of prescreening -- giving them the right to participate in the decision to use their information for firm offers of credit. Trans Union’s opt-out program does comply with the FCRA, Judge Timony said. Trans Union does not, however, require its clients to notify consumers of their right to opt -out of target marketing lists other than on prescreen.

In 1992, the FTC charged that Trans Union’s sale of target marketing lists violated the FCRA. Those charges were upheld by Administrative Law Judge Lewis F. Parker in a 1993 summary decision and by the Commission in 1994. Judge Parker’s finding that there was no real dispute as to the facts of the case was rejected by the U.S. Court of Appeals, which returned the case to the Commission. The Commission then remanded the case for trial before Judge Timony. The trial before Judge Timony began on February 17, 1998. The record closed on March 27, 1998.

During the 1998 trial, FTC lawyers offered a survey to assess consumer attitudes regarding the use of consumer credit information to compile marketing lists. Sixty-eight percent of the survey’s respondents found the use of credit report information for the compilation of marketing lists to be unacceptable. "The conclusion that the Fair Credit Reporting Act protects consumers’ privacy interests by prohibiting the unauthorized dissemination of their credit histories to third-party marketers is supported by the results of the consumer survey ... ," Judge Timony said in his decision.

One Trans Union argument rejected by the Commission and the administrative judges was that target-marketing lists do not fall within the definition of "consumer reports" that are protected by the FCRA. "Each of Trans Union’s target marketing products is a consumer report because it discloses information from Trans Union’s consumer reporting database that is also used by credit grantors for credit eligibility determinations," Judge Timony said.

The decision points to a 1993 Commission agreement with TRW Information Systems -- a second major credit bureau -- which allows TRW to extract certain consumer information such as: name, telephone number, mother’s maiden name, address, zip code, year of birth, age or social security number from its database for target marketing. TRW, unlike Trans Union, does not extract high credit amounts, auto loan expiration dates, and loan dates from its consumer reporting data base for use in target marketing lists.

Only Trans Union offers target marketing lists based on individual-level credit data, the decision states. These lists are unique in their source, in the extent of individual information they reveal, and in their use in target mail and telephone promotions. For example:

Trans Union offers lists indicating the number of open automobile loans, loan type, the open and expiration dates for the lease or loan, and the high credit amount of the lease or loan. (Other target marketing firms offer automobile lists limited to ownership information and not the range of data that Trans Union supplies.)

Trans Union sells lists that permit target marketing of persons who have an open bank card. (Other firms offer bank card lists, with the information at the household level, from self-reported survey responses or from suppliers of credit card information not from consumer credit reporting databases.)

Trans Union offers mortgage-related lists including: the presence of an open mortgage, presence of a second open mortgage, and the open and closed dates and high credit amounts of both mortgages. Trans Union’s customers can also obtain information about the type of mortgage loan (VA, FHA loans or secured home improvement loans). (List providers other than Trans Union offer mortgage lists. Their information is from self-reported sources such as surveys, and the public record -- including county registrar and tax assessor files.)

Trans Union’s income estimator, calculates an individual consumer’s estimated income based on its credit data. (Competitive lists providers offer estimated income developed from public record and self-reported data, subjective information that has not been verified, and household income rather than individual level income.)

Judge Timony also rejected arguments that Trans Union’s lists are protected by the First Amendment, citing both the government’s substantial interest in protecting consumers’ right to privacy and the fact that the FCRA advances this interest without being unduly restrictive.

Judge Timony noted that the FCRA and the Order he issued "directly advance the governmental interest in protecting consumers’ right not to have covered information communicated by consumer reporting agencies to target marketers without a permissible purpose." The judge also concluded that the opt-out procedure required by the FCRA does not cure the problem. "While the right to opt-out theoretically allows the consumers to request their names to be removed from target marketing lists, most consumers are unaware of this procedure.

Although Trans Union complies with the notice requirement for opt-out under the FCRA, there is no credible, direct evidence of the success rate of opt-out actually stopping direct mail or telemarketing calls," the decision states.

Judge Timony also pointed out that the statute does not outlaw the use of credit information for target marketing; it merely requires credit reporting agencies to include consumers in the decision to use their information.

Thus Judge Timony concluded that Trans Union assembles information on consumers to furnish consumer reports to subscribers and consumers. Trans Union is a consumer reporting agency. Trans Union’s target marketing lists are consumer reports. Trans Union furnishes consumer report information in target marketing lists to persons who do not have a permissible purposes under the FCRA. By this conduct, Trans Union violates the FCRA.

The judge’s order is subject to review by the full Commission on its own motion or at the request of either Trans Union or the FTC staff. If the order is not appealed within 30 days, it will become binding on Trans Union as the final Commission order.

Copies of Judge Timony’s decision are available from the FTC’s web site athttp://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202- 382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.